Mark Zandi isn't an easy person to catch up with. He's very busy these days, always moving--sometimes in Washington advising policymakers, and sometimes at his desk at Moody's Economy.com in West Chester writing his latest assessment of the economy or some part of it.
It's really not surprising that he's busy and in demand. Over the twenty-odd years that I've known him, I've learned more from Mark Zandi about how the economy works and how it influences my job and my business than I have from just about any other professional economist. Few economists can offer as clear an explanation of the complexities and implications of the economy's various moving parts as Mark.
That's why I needed to talk to him. I needed some clarity. 2009 was an unusually difficult year. The economy was hammered by intense crosswinds that blew through the financial markets, the housing market and the employment situation. Consumers and businesses alike have teetered. Many have collapsed. Little has been left unaffected by the economic storms that began in 2007 and intensified through early 2009. Recently, there are some troubling signs that commercial real estate, too, will suffer damage and could jeopardize the economic recovery itself. So, I wanted to ask Mark where things might be headed. Is it getting better? What might "better" look like? When will the jobs come back? What can we expect for this industry?
During the fall, I finally managed to visit briefly with Mark, via email, to get an update on his discussions with The Counselors this past spring at the Waldorf in New York, and to understand what to expect next. He has graciously offered some additional insight into where we have been, where we are right now and where we might be heading in the coming months. What follows is a transcript of our electronic conversation.
BURLEY: When we last met in New York this past spring, we were still in the midst of the longest, deepest, steepest, and most widespread recession since the Depression of the 1930s. Beginning in late 2007 and continuing, apparently, through at least the middle of 2009, we experienced a brutal retrenchment in economic activity that has lasted for nearly two years. The nation's economy, as reflected in the GDP numbers, declined at an annualized 5.4 percent in the fourth quarter of 2008, 6.4 percent in the first quarter of 2009 and about 1 percent in the second quarter. Finally, in the third quarter of 2009 we saw GDP post a gain of just under 3 percent. For all of 2009, though, Moody's Economy.com expects GDP to post a decline of about 2.5 percent. And, the outlook for 2010 is for rather tepid growth of just over 2 percent.
Total employment continues to contract and is down more than six million jobs since the beginning of the recession (more than three million so far this year alone). Unemployment continues to track higher, with many analysts (including Moody's Economy.com) expecting joblessness above 10 percent through much of 2010, even rising as high as 11 percent by next summer.
Foreclosures continue. Weak home prices have undermined tax revenues, wreaking havoc on local and state budgets. And, importantly, consumer spending remains subdued, despite government supports like "Cash for Clunkers."
There do appear to be some promising trends, of course. Housing appears to have hit a bottom of sorts, although there are some questions as to how long we may remain near or at that bottom, even as tax credits for first time buyers--and, now, repeat buyers--are extended into 2010. Home prices keep falling, though. The stock market is clearly higher, if at times tentatively, from the depths of last spring. Manufacturing indicators are somewhat improved, with the ISM survey reaching above 50 for the past few months, suggesting that recent inventory draw-downs have boosted production. Consumer demand appears modestly improved, at best, however, perhaps for the long term, with non-auto retail sales posting only small gains in the most recent "post-Clunkers" reports. …